In continuous replenishment the inventory levels at the customer level, or the retailer in retail sector, are maintained by the vendor continuously and the goods are replenished as per the agreed upon level. This calls for good synergies between all the parties involved – producer, distributor, vendor, retailer and customer. At least one party monitors the inventory level of the other party.
In some cases the vendor keeps a track of the customer’s inventory levels and based on the real time data or forecasted data, the goods are replenished. In other cases the customer himself keeps in touch with the vendor and continuously gets the replenishment.
This is in contrast with the traditional inventory management in which the goods are procured by purchase orders and the distributor or the vendor processes these orders to supply the goods.
CRP brings about multifold advantages and makes the supply chain more effective.
• Cost saving because of the decreased number of employees required in the supply chain. Employees who are responsible to maintain the inventory level and place the purchase order will no longer be required.
• Delivery quality also improves because of lesser hindrances and middlemen in the supply chain.
• It enhances the relationship between the supplier and the customer and helps in the long-term.
Hence, this concludes the definition of Continuous Replenishment Program along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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